Prospects for member countries of the Economic Community of West African States (ECOWAS) to establish a common economic block and adopt a single currency- being proposed as the ‘Eco’ – remain uncertain, few months to the 2020 deadline, Zainab Ahmed, Minister of Finance, Budget and National Planning admitted at the weekend.
The uncertainty stems from the inability of member states to meet a set of convergence criteria before the Monetary Union can be established.
To achieve a common monetary integration programme required each member country to comply with a set of four primary and six secondary convergence criteria to ensure a stable macroeconomic environment.
Those criteria were set in November 2002 by the forum of finance ministers of the West African Monetary Zone (WAMZ) who decided to facilitate the harmonization of fiscal and monetary policies and introduces those two sets of conditions to drive the effective the establishment of the MU and adoption of a single currency proposed as Eco.
The Primary Criteria include; Budget Deficit/GDP ratio (excluding grants) of less or equal to 4 per cent; Inflation rate of less or equal to 5 per cent; Central Bank Financing of Budget Deficit of less or equal to10 per cent of previous year’s Tax Revenue; as well as Gross External Reserves of greater than or equal to 6 months of imports cover.
The Secondary Criteria include; Prohibition of new arrears and liquidation of all outstanding ones; Tax Receipts/GDP ratio of greater or equal to 20 per cent; Salary Mass/Total Tax Receipts ratio of greater or equal to35 per cent; Public Investments financed from internal resources/Tax Receipts ratio of greater or equal to 20 per cent; Positive Real Interest Rates; and Real Exchange Rate Stability.
At a meeting of ECOWAS Finance Ministers and Governors of Central Banks in Abuja to review progress, Ahmed said only Togo was able to meet all the criteria in the last two years.
She said while it is important for the ECOWAS economies to maintain macro-economic stability, they must see themselves bound by obligation to ensure that statistical data accuracy in their records are maintained.
This is because the crisis that threaten the Euro was not one that lies in the euro as a currency but with the economy and financial situations of the countries that used the euro.
“Data must therefore be very factual and be real reflection of what is happening in our economy,” she urged.
The minister, however admitted recent major milestones, including, “the adoption of the flexible exchange rate regime, a monitoring of policy framework based on inflation targeting, a system which best accommodates our regional peculiarities were also adopted by our regional group.
“We also adopted the ECOWAS Central Bank, and the name “ECO” for the future Ecowas single currency,” she stated, adding that, the process will lead to the establishment of an Ecowas central bank to oversee trade and financial integration, promoting the use of national currency to facilitate cross border trade payment, financial transactions, as well as reserve management.
“But as these achievement is exciting, the prospect for currency feature in 2020 build in terms of macro economy stability and convergence is to say the least rather uncertain,” Ahmed told the gathering.
“This reason is predicated on the seemingly intractable challenge of member countries failure to satisfy the convergence criteria on a consistence and sustainable basis, in a manner that is stipulated in the supplementary act relating to macro convergence stability Act.
“Reports indicated that Togo was the only country that met all the primary criteria over the past consecutive 2-year period and the first half of 2019 and likely to complete the round by the next half of this year.
“But we cannot operationalise our MOA 2020 with Togo alone, and this indeed makes the prospect of the introduction of the Eco in 2020 somewhat problematic.”
She said the critical question not just whether the monetary union would be established in 2020 as envisaged on account of the challenges posed by macroeconomics convergence inconsistencies, but that there are unresolved issues and non- implementation of failure to fully implement some critical road map activities.
“It is actually whether the recent momentum gathered in the process can be sustained or whether the commitment of the regional political can find tangible expression at notable rate.
“It is in the light of this that Nigeria supports the establishment of an ECOWAS Central bank in the coming year but we also strongly fear whether we all can work to also meet the convergence criteria.”
But Nigerian economy has continued to record relative improvement, as government continues to work towards an improved economy which expanded to N33.3 trillion in the half of 2019 from N32.68 trillion same period of 2018, driven by the non-oil sector, she said.
She also noted stability in the general tax income levels incomes as well as ratio of total public debt portfolio to GDP which has remained stable at 18.99 percent in the first half of 2019.
“This threshold is very much low compared to the international threshold of 85 percent for our comparative countries as well as the ECOWAS convergence debt threshold of 70 percent.”
Ahmed also used the opportunity to allay wide fears on Nigeria’s closed borders, assuring that government understands the importance of trade liberalization and subscribes to a free and fair trade system which benefits all of the countries.
However, it is also imperative for countries to ensure that the facilitating agreements and protocols that strike balances between their domestic economies and ambition and commitment in multilateral trade are adhered to fully with openness and honesty.
“Therefore, as a government we decided to take the painful but pro-active step to check these inter border excesses because in the longer term, it is not only going to affect the Nigerian economy but the competitiveness of the entire region and this would weaken the potential benefit for our common market and of the Africa continental free trade agreement,” she explained.
“Checking such excesses must be the task for every responsible government,” she stated as she informed of a recent tripartite meeting between of Benin, Niger and Nigeria to resolve burning issues.
Onyinye Nwachukwu, Abuja